Bluebird Merchant Ventures – Batangas extension in Phillipines underlines value major dislocation in stock price. Buy

October 4, 2022 | Posted by

By Dr Michael Green

More firm evidence this morning that the highly prospective Batangas Gold Project in the Philippines is rapidly being brought back into play. Bluebird Merchant Ventures announced tremendous news this morn that the company has been granted a 2-year extension to the exploration period to its current 25-year Mineral Production Sharing Agreements (MPSA) at Batangas.

What this all means is that BMV will be able to complete the outstanding Exploration and Environmental Work Programmes. The end result is that the company will have the time to not only increase the size of the resource but also importantly set about reworking the plan to make the most of the underground mining potential at the high-grade Lobo area of the project. 

With all that work tied up, it looks as though the company would be in the position to submit the Declaration of Mining Project Feasibility plus gain the essential Environmental Compliance Certificate which would be the remaining hurdle ahead of beginning underground gold production at Lobo.

The granting of this ‘Exploration Extension’ serves to significantly de-risk the project in the eyes of the board and they are dead right. All of this is happening very rapidly which to us demonstrates that the new governmentis not just mouthing platitudes in its support for the country’s mining industry projects. There is no doubt this is a big move forward as now the company will be able finalise discussions with local partners to develop Batangas on an expedited basis.

BMV has a 100% interest in Batangas which spans two 25-year MPSAs covering a total of some 2,174-hectare licence area with multiple targets and an established resource of 444,000 ounces of gold. The plan is to prioritise the Lobo project area which has a current 36,000 oz gold Reserve (which could be mined in the first 18 months of operation) and an Indicated resource of 82,000 oz gold (which is thought could easily be converted into Reserve ounces) primarily in the South West Breccia (SWB) high grade zone.

It is a big understatement to suggest that Lobo remains highly prospective however, plus there’s immediate exploration upside for further high-grade gold discoveries. Interestingly the mineral resources are associated with a linear, steeply dipping, epithermal lode with high grade ‘shoots’ of mineralisation, similar to Medusa Mining’s Philippine projects.  As on top of the Reserve and Indicated resources, the Lobo licence area just seems to keep on giving as it hosts multiple epithermal and high-grade targets which are already on the cards for resource expansion

The company has really whetted the appetite of investors in highlighting the sort of cracking grades that have been discovered at Lobo. Testing of the footwall lode at the SWB extension, produced results including a highly impressive 2.1m @14.4g/t gold and 3m @12.1g/t, whilst the West Drift (which already has an Indicated and Inferred resource of 350,000t @ 3 g/t gold along with high-grade surface trench intersections) yielded 8.35m @ 18.4 g/t gold), 2.6m @ 28.6 g/t gold and 3m @ 22.2 g/t gold.

But there does look like there is a lot more to come from the five key targets identified within 15km strike on 5 parallel epithermal lode structures which includes Camo, where major flexure “look-a-like” target to SWB. It looks like management are looking at a project expandable into something with tremendous potential. At this point it is worth pointing out that BMV has placed no attributable value in its books for this project and that has seen over US$20 million spent on exploration.

BMV’s CEO Colin Patterson was quick to point out that “The grant of the ‘Licence Extension’ will allow us to complete the final studies required for a production decision.  This is a major step forward and de-risks the development pathway to production significantly.  Earlier this year the Project was written off due to the in-country situation, but now we have a high-grade project with excellent exploration and development upside, sunken exploration expenditure of c.$20m, a supportive mining code and local partners interested in co-development.  We believe Batangas has excellent potential and look forward enhancing the project, announcing regular news and converting it value into Bluebird’s valuation, which at present levels is not happening.”

As for the unrivalled opportunities in South Korea Colin added that “Beyond the Philippines, we continue to progress our South Korean projects, the Kochang Gold and Silver Mine and the Gubong Gold Mine.  Both historic mines, closed in the 1970’s when the gold price was below US$100 per oz, offer exceptional opportunity to bring back into production and underpin our strategy of being a significant London listed gold producer with a valuation that reflects this.”

We like small cap resources stocks where the management has a decent amount of skin in the game, dare we say – “aligned” with shareholders.  Management are much more motivated to make a success of the projectss. In these respects, BMV scores extremely highly as between them the board has in excess of 25% of the shares. On top of that to conserve cash the management team have voluntarily taken equity instead – such is their belief in the projects. This speaks volumes.

By any yardstick this stock is seriously undervalued. In June 2021, we revisited our target price for the stock. Using a flat gold price of US$1775 per ounce, we have determined a Net Present Value using a 12% discount rate of US$302.56 million. To be more conservative to allow for project execution risk, we have discounted this NPV by 50% resulting in a figure of US$151.28 million. This equates to 23.28p per share based on the number of shares in issue (467,482,119). Based on the number of shares on a fully diluted basis (650,901,578 where we included all of SAU’s 200 million shares) gave a figure of 16.72p which we adopted as our new target price.

We look forward to getting the opportunity to revisit our target price for this stock, but it is important to realise that this figure does not contain any contribution from Batangas. Given the general market malaise in recent months, in particular in small cap stocks in the resource arena, the near 70% decline in the last 5 weeks in the price of BMV is all the more perplexing and has thrown up, in our opinion, one of the most compelling Buying opportunities in the small cap space at the current price of 1.25p. It does looks as though the stock’s time has really now come.


Bluebird Merchant Ventures is a research client of Align Research. Align Research Investments & its Director are one of the largest shareholders in Bluebird Merchant Ventures and and cannot be seen to be impartial in relation to the share price outcome. Full details of our Company & Personal Account Dealing Policy can be found on our website 

This is a marketing communication and cannot be considered independent research. Nothing in this report should be construed as advice, an offer, or the solicitation of an offer to buy or sell securities by us. As we have no knowledge of your individual situation and circumstances the investment(s) covered may not be suitable for you. You should not make any investment decision without consulting a fully qualified financial advisor.

Your capital is at risk by investing in securities and the income from them may fluctuate. Past performance is not necessarily a guide to future performance and forecasts are not a reliable indicator of future results. The marketability of some of the companies we cover is limited and you may have difficulty buying or selling in volume. Additionally, given the smaller capitalisation bias of our coverage, the companies we cover should be considered as high risk. You should also assume, given that the majority of Align’s fees are received in stock, that for general corporate cash management purposes including taxation that divestments of investments held will take place as and when, in Align’s sole discretion, it is deemed appropriate.

This financial promotion has been approved by Align Research Limited